On 20th July 2021, the Supreme Court, in a huge boost to federalism, struck down portions of the 97th Constitutional Amendment, that restricted state’s exclusive control over cooperative organizations, which is a key contributor to the national economy.

A cooperative society is a voluntary group of people who have similar needs and work together to accomplish a shared economic goal. Its goal is to serve the poorer parts of society through the principles of self-help and mutual aid. The primary goal is to give assistance to the members. People come forward as a collective, pool their individual resources, make the greatest use of them, and get some shared advantage from it. The provisions of the Co-operative Societies Act, 1912, allow for the formation of a Co-operative Society in India.


On December 7, 2004, a conference of ministers dealing with cooperatives was convened in several states, to resolve the country’s major problems about voluntary creation, independent functioning, democratic control, and professional administration of cooperatives. The conference agreed to alter the Constitution to ensure the democratic, independent, and timely conduct of elections in cooperative organizations. The Constitution (97th Amendment) Act of 2011 made the following amendments with the goal of encouraging cooperative economic activities, which in turn aid rural India’s progress: As part of basic rights, the phrase “cooperative societies” was inserted following unions and associations in Article 19(1)(c). A new Article 43B on the promotion of cooperative organizations was added to the Directive Principles of State Policy (Part IV). Part IX-B (Articles 243ZH to 243ZT) was introduced, which implemented various provisions for state laws controlling cooperative societies. The said amendment was passed even though it had not been ratified by the state legislatures. As a result, the constitutionally mandated procedure was not followed.


A flurry of applications was filed before the Gujarat High Court and many other states, arguing that the amendment violated the fundamental framework of the constitution. One Mr Rajendra N. Shah (hereafter referred to as petitioner) filed a writ petition at the High Court of Gujarat in Ahmedabad in 2012. The main point of contention was the 2011 amendment to the Indian Constitution, which stated that embedding Part IXB, consisting of Articles 243ZH to 243ZT, violates the Indian Constitution because it does not use Article 368(2) of the Constitution, which requires express ratification by a majority of the State Legislatures.

The petition specifically stated that Article 368’s power is related to the Indian Constitution’s basic structure and that the impugned constitutional amendment did not follow the procedure prescribed in Article 368(2) of the Constitution, which recognizes the federal structure of the Constitution as one of the basic structures, and thus, is a violation of the Indian Constitution. According to the petitioner, because the cooperative societies do not fall under the VII Schedule Entry 45 of List I of the Constitution and are expressly excluded from Entry No. 43 of List, the proposed amendment should be struck down as violative of the Indian Constitution (2). Additionally, a second question that arose in the petition was whether multi-state co-operative societies could be distinguished from the co-operative societies in Part IX-B.

The Gujarat High Court ruled in this case that the amendment stripped state governments of their vital authority. Thus, The High Court held that the constitutional amendment introducing Part IX-B was unconstitutional because it lacked the required ratification under Article 368(2). Dissatisfied, the Union of India filed this appeal with the Supreme Court. The Supreme Court affirmed the high court’s ruling on July 20, 2021, preserving the primacy of state governments. Furthermore, this amendment would have resulted in substantial centre-state involvement in state issues. The Indian Constitution’s federal structure was taken into consideration before delivering this ruling.


On July 20, 2021, a three-judge panel comprising of Justices R.F. Nariman, K.M. Joseph, and B.R. Gavai affirmed the Gujarat high court’s decision in the case of Rajendra N. Shah v. Union of India. Only Part IXB was declared unconstitutional by Justices R.F. Nariman and B.R. Gavai. However, Justice K.M. Joseph stated that the whole constitutional amendment must be struck down.

According to the All-India Kisan Sabha, the amendment was causing India to become more centralized, which would undermine the federal system. And in order to maintain the influx of workers, it was important to retain the powers with the states intact and to exclude the Centre from the equation. The amendment was challenged due to a number of flaws. One of them was that the amending process was not followed. Second, the clauses constitute an assault on state legislature’s rights. Third, the clauses do not adhere to the constitution’s federal characteristics. Fourth, the provision did not provide cooperative groups with any power.

On the other hand, the government justified their actions by claiming that they were instilling professionalism and autonomy into the operations of cooperative societies by way of the introduction of the amendment. Members of these societies lacked accountability which has resulted in poor services and low productivity. Elections were also not held on schedule. The government contended before the Supreme Court that cooperatives must be operated on “well-established democratic norms.”

The court concluded in a majority decision written by Justice Nariman that cooperative organizations are under the “exclusive legislative power” of state legislatures. The decision may be important in light of the state’s concerns that the new Central Ministry of Cooperation will de-empower them. Thus, Part IXB has been struck down, but the Constitutional Amendment has been saved, according to the judgement. It has been argued that the part not only deprives people of their powers but also limits them.


In the aforesaid case, Justice K.M Joseph issued a dissenting opinion, arguing that the entire Part IX-B should be invalidated. He concurred with the majority’s reasoning that the provisions pertaining to Articles 240-ZI to 243-ZQ and 243-ZT were unconstitutional for failing to comply with the requirement of the proviso to Article 368(2) of the Constitution. However, he emphasized his unwillingness to agree with the idea that the theory of severability will apply to uphold Articles 243-ZR and 243-ZS to Multi-State Cooperative Societies operating in the Union Territory, but not cooperative societies restricted to the territories of Union Territories. He noted that the provisions of Articles 243-ZR and 243-ZS are completely reliant on the provisions of Articles 243-ZI to 243-ZQ.


With its decision to overturn a significant portion of the Constitution (97th Amendment) Act of 2011, the Supreme Court accomplished two things: one, it strengthened the quasi-federal nature of the Indian polity, preventing any abridgement of state rights, and two, it clarified the scope of the new Union Ministry of Cooperation’s operations. To the extent that the court invalidated the 97th Amendment due to a procedural flaw, it is still possible for the Centre to take measures to correct that flaw and restore the 97th Amendment’s force.


Written By: Aayush Akar, Student, National Law University Odisha and Deepanshi Kapoor, Student, Alliance University, Bengaluru

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Hey, this is Aayush, the corporate law enthusiast. He is a driven individual with the ability to adapt to any given situation and proven potential to grow himself and others around. He is currently a Penultimate Year student pursuing a B.A., LL.B. (Hons.) from the National Law University Odisha. View Full Profile

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September 2021